Russian MRO market reality Speaker: Vladimir Perekrestov CEO v.perekrestov@e-mro.aero Aircraft Maintenance Russia and CIS 8th international conference Moscow, Russia, 20-21 February 2013 www.engineering-ru.com Ready to serve the world Content • Development of Western-built aircraft MRO market in Russia • Russia&CIS MRO market • Advanced market segments • Competition in market of core products and services • Characteristics of Russian MRO market • Conclusion www.engineering-ru.com Ready to serve the world Development of Western-built aircraft MRO market 1992 – Airbus A 310 was the first western-built aircraft to be operated in Russia 1996 – First time when Russian company gained EASA Part 145 approval 2004 – First ะก-Check maintenance on Airbus A 320 Family was implemented in Russia 2005 – 2006 –Soviet-built to Western-built large-scale fleet replacement in Russia 2005 – 2008 – High demand for engineering and technical personnel to perform maintenance on aircraft and parts 2006 – Establishing the first EASA Part-147 approved training center to provide engineering and technical personnel training services 2011 – Cancellation of customs duties on western-built aircraft spare parts 2011 – First D-Check maintenance implemented on Airbus A 320 Family in Russia 2012 – First Redelivery Check performed on Boeing 737 CL in Russia 2012 – Establishing the consignment stock of commercial western-built aircraft spare parts in Russia www.engineering-ru.com Ready to serve the world Number of western aircraft in Russia/Other CIS fleets 200 180 160 140 120 100 80 60 40 20 0 CIS Russian Federation Wide-body aircraft Narrow-body aircraft Regional aircraft Total RF 89 387 78 554 CIS 25 156 57 238 Total 114 543 135 792 *Source AeroTransport Data Bank, October 2012 www.engineering-ru.com Ready to serve the world MRO market Russia and CIS, USD M* Wide body A/C Regional A/C Narrow body A/C Market volume Russia and CIS, USD M Base Line Modifications Components Engine Total 232 357 161 393 644 1 787 * 2012, estimate made by Engineering Holding www.engineering-ru.com Ready to serve the world MRO providers in Russia and CIS market: competition MRO providers in Russia and CIS: The World’s MRO providers: Vostok Technical Service Analysts are forecasting competition increase among organizations which provide MRO services on the territory of Russia www.engineering-ru.com Ready to serve the world MRO market in Russia and CIS, capability High Engineering Base Maintenance Landing Gear Line Cabin interiors Evacuation Equipment Labor share of total cost Wheels & brakes Thrust Reverser ? APU Hydraulics Fire protection & Oxygen Electric Power Cabin Systems Fuel Engine Air system Batteries Up-front capital investments required Low Source: ICF SH&E Analysis Avionics High Current market www.engineering-ru.com Ready to serve the world Potential market Breakdown of Total Airline Costs – From World Experience Maintenance costs typically range between 7%-14% of an airline’s operating budget Typical Airline Cost Breakdown Fuel 26% Typical Airline’s MRO Cost Breakdown Mktg, Sales 8% Line & A Checks; 20% Engine; 36% Maintenance 9% Labor 25% Other 22% Dep., Amort., Rent 10% Component, 22% Modification, 9% Heavy Airframe, 13% Annual airline maintenance spend as a % of total cost will fluctuate year-to-year based on timing of major visits (e.g. D-checks & engine overhauls), fleet age, size, mix and the price of fuel Source: Form 41 & ICF SH&E Analysis www.engineering-ru.com Ready to serve the world Characteristics of Russian MRO market: Planning & IT Airlines’ insufficient maintenance insufficient IT support: planning horizon and • Failure to plan preparation for maintenance checks (aircraft spare parts and labour resources) • Increasing maintenance TAT • Maintenance costs increase Only 5 customers of Engineering Holding develop and provide long-term (1-2 years) maintenance plans www.engineering-ru.com Ready to serve the world Characteristics of Russian MRO market: spare parts stocks & supply chain management Absence of market players who own large aircraft spare parts stocks on the territory of Russian Federation and insufficient supply chain management: • Minimum spare parts stocks for the most demanded aircraft types • Poorly developed aircraft parts-out business & A J Walter Aviation www.engineering-ru.com Ready to serve the world Characteristics of Russian MRO market: additional services Insufficient Airlines’ attention to the technical aspects such as: • Aircraft interior and cabin equipment repair • AC delivery/redelivery • AC documentation and records keeping www.engineering-ru.com Ready to serve the world Characteristics of Russian MRO market: changing aircraft fleet structure Airlines fleet renewal: • Russian operators reduce their Boeing 737 CL fleet • Reducing average age of aircraft • Reducing maintenance checks man-hours • Demand for modern aircraft maintenance www.engineering-ru.com Ready to serve the world Conclusion: Opportunities to reduce airlines’ maintenance expenditures • Improvement of maintenance planning horizon • Implementation of proper IT solutions • Increase of aircraft maintenance outsourcing share in segments where in-house maintenance is not cost effective • Growth of aircraft spare parts stocks in Russia • Improvement of supply chain management efficiency www.engineering-ru.com Ready to serve the world Thank you for your attention! www.engineering-ru.com Ready to serve the world